Microfinance as a Catalyst for Sustainable Development: A Cross-National Comparative Study of the Environmental and Social Impacts

Abstract

This study examines the role of microfinance institutions (MFIs) in advancing sustainable development by integrating environmental and social objectives into their operations. Using panel data from 30 MFIs across nine countries (2018–2023), the analysis applies Ordinary Least Squares (OLS), Instrumental Variables (2SLS), and Generalized Method of Moments (GMM) to assess policy impacts over time. “Access to environmental finance” is used as a validated instrument to address endogeneity. Results show that green lending and environmental risk management significantly reduce greenhouse gas emissions and improve gender empowerment. Larger institutions with stronger governance achieve better outcomes, and dynamic models (GMM) confirm the persistence of these effects over time. The findings highlight the importance of regulatory support, green finance infrastructure, and institutional capacity-building for scaling sustainable microfinance.